In all the excitement of the shifting markets brought about by the arrival of legalized recreational cannabis and the volatility of 2018, an investor could almost forget about the regulators.
In Canada, the regulation of markets houses under the Canadian Securities Administrators (CSA). Like the Royal Canadian Mounties, it has duties. Those duties involve protecting Canadian investors from improper, unfair or outright fraudulent practices. It attempts to offer policies that make Canadian markets efficient and fair. News about the regulators shows up in court documents, press releases and occasionally, a news story. Anyone playing in the Canadian markets including investors at some point bumps into the Canadian regulators.
Supreme Court
With all the enthusiastic news about cannabis and Sustainable Development, some key information on new policies and mandates at the Canadian Securities Administration did not quite make it into the public’s mind. Investors exploring the parameters set could save much time and money plus highlight good opportunities to invest in Canada. Recently, a report was released citing how Canada’s Supreme Court has cleared the path for the National Canadian Securities Regulator to operate.
Of all the G20 nations, Canada does not have a national securities regulator. With Canada’s drive to become a global influencer in the capital market, the 13-member provincial and territorial securities commission cannot offer the efficiency for such a goal. The Supreme Court of Canada endorsed a law offering a national securities regulator position.
The goal is to unify the system of regulation between the federal government and the provinces and then take it global. The provinces since 2011 have recognized the need for such infrastructure but creating a constitutional system had been a problem. The holdup had been delegating the duties between national and provincial. This would allow more foreign investment into Canada.
In the News
As of December 2018, Cision reported a possible change in the fee and rebate system used in the marketplaces. A Trading Fee Rebate Pilot Study was put up for notice for comments. The study will look at doing away with the rebate payments in the market system. Exchanges and alternating trading systems would become temporarily stopped for a set of sample securities defined as actively traded, highly liquid and of medium liquidity securities level.
The grizzly bear growl of the Canadian regulators was reported by Mondaq mid-December 2018 and then updated. The security regulators did not like some of the promotional activities some companies were doing. They found the material untrue and unbalanced and the entity believed it would mislead investors.
Misinformed investment decisions cause artificial inflation in markets. It favors issuers share price or trade volume. If enough companies do that, then market integrity falls. To regulate it, the commission will analyze the short sells done on Canadian capital markets. Constraints will become applied to promotional activities. Regulation will, for a time, favor investor in the capital markets.
It had a long list of inappropriate promotional materials. Astoundingly, announcing a positive event like large acquisition then canceling the purchase without announcing that will cause a penalty.
At the same time, Canadian Securities Regulators amended the National Instrument and numbered it 81-102. It also revised a companion set of policies for implementation this January 2019. Its biggest implication is that it will allow alternative mutual funds offered to retail investors just like conventional retail mutual funds.
Some investment restrictions will become loosened and the simplified prospectus process will guide the transactions. It defined permitted short-selling and permitted borrowing. Extensive, the changes will need interpretation by portfolio managers and financial advisors to understand the full economic impact.
In the end, a set of procedures and rules have changed for companies and investors in the Canadian markets. With extensive market volatility, a person needs to have a frank discussion with their financial advisor on how the percent of the market measures from the baseline as compared to previous years.
Classifying groups as having investor confidence to lack of investor confidence may clarify risk. Having a resource like the Canadian Securities Administration gives investors a place to check on information given.
(Featured image by D. Gordon E. Robertson via Wikimedia. CC BY-SA 3.0)
